It just seemed unfair, recalls Robert Bradshaw, president and CEO of the Independent Insurance Agents of Virginia Inc. A small contractor whose truck had been rear-ended while stopped at a traffic light was penalized with a higher workers’ compensation insurance experience modification rate, disqualifying it from bidding on projects.
The incident wasn’t the first time Bradshaw had heard about contractors receiving EMR hikes after off-site accidents in which employees or their companies were not at fault. But it was enough for his association to launch the first and so far only successful state lobbying effort of its kind. It sought to prohibit the use of a particular EMR for eligibility to bid on construction services, including private-sector projects not covered by the state’s public procurement rules.
The Virginia Dept. of Transportation collects contractor EMR data to derive a six-year average the agency calls an Experience Modification Factor, a figure that represents only a small part of the overall safety evaluation.
Bradshaw says the rule change, enacted by Virginia’s state legislature in 2016, followed an unsuccessful attempt the previous year. That measure called for the National Council on Compensation Insurance (NCCI), the main rate-making organization for workers’ comp insurers, to create a separate EMR calculation that excludes incidents where the contractor is not at fault.
“As it turned out, we got a 100-percent better bill,” Bradshaw says of the final legislation. It calls for dropping EMRs entirely from prequalification requirements. “We also used that additional time to talk to legislators about problems with the existing situation and get everyone on board.”
Recognizing some of the problems in the use of EMR, NCCI now includes a disclaimer in its reports, advising against the calculation as a prequalification metric. Some insurance agents in other states report a greater willingness among general contractors and owners to gather more information about a contractor’s EMR. “We encourage smaller contractors to be up-front about it,” says Joe Tiernan, a shareholder in the Kansas City, Mo., office of broker Holmes Murphy.
Bradshaw says that aside from a few queries by members, the years following Virginia’s law change have been largely quiet. Not all contractors may realize they have an avenue to contest EMR-related disqualifications.
But he’s satisfied with having brought a “patently unfair practice” to the legislators’ attention. “The bill takes effect, and the phones stop ringing,” he says of the problem. “That’s how it’s supposed to work.”